Bitcoin Forum

Hello guys,
As i'm trying to promote bitcoins to some of my friends, one of them, who's quite computer savy asked me this question and i wasn't able to answer it properly.
The question was basically "What is all that computing power used for?" to which i answered : it's used to solve the algorythm designed by Satoshi in order to award bitcoins when a block has been solved. (more or less i can't remember my exact phrasing but that would be along those lines, as this is my basic understanding of the process)

Now i'm not the best to explain this to that guy, for he asked me again the very same question just after and i could see the loop we were in.
How can i satisfy this guy curiosity? What is all this power used for in the end? that algortyhm could be all designed to crack some encryption or something along those lines for all we know? Couldn't it? (this is what he told me or something of the same nature that i failed to retranscribe)

If you guys can provide a curious computer nerd with some infos, i'll be glad to be your messenger :-)

Cheers for your time.

BTChap

This is a good question.  Primecoin finds prime numbers....

What does bitcoin do though?  You cannot tell me that all that power is just going up in smoke....

Interesting question !

It is used to ensure the integrity of your transactions and prevent double-spends (counterfeiting) which is a very hard problem for a decentralized digital currency.

But it is. All that power is used to throw random numbers at a hash function twice until one is mangled enough to have the required number of leading zeroes. There's your complex math puzzle: throwing shit at a wall until something sticks.

Thats crazyness.  You would think that Satoshi would have worked in some way for all this electricity and power to be useful for something else also.  Kind of sad actually.  Fold some proteins at least

The work is useful.   If you build a depository safe, install a security system, hire round the clock guards, and as a result of the security nobody robs the depository was the resources "wasted"?  Would it have been better to try and making it do something else at the same time?  Would it be better if that compromise resulted in the depository being robbed?

Creating a decentralized consensus is a difficult problem, an incredibly difficulty problem, there has been NO solution to this prior to Bitcoin.  The work isn't wasted the work protects the network.  Bitcoins are worth more than a billion dollars BECAUSE of this solution.

I guess he'd have done so if Bitcoin was ever intended to be anything other than a tech demo.

You don't think securing one of the best payment systems in the history of mankind isn't useful?  And finding random prime numbers is somehow more useful?

Ok, you told your friend what it was used for and he asked the same question.  He probably needs to figure out how to better phrase his question.

Here are some possibilities, but in the end I'm only guessing what he wants to know:

• It is "used" to secure the transaction ledger so that nobody can modify a transaction after it has been recognized by the bitcoin network as "confirmed". In exchange for doing this work of securing the transaction history, the person who successfully solves and broadcasts a valid block receives a reward that consists of the sum of a subsidy of newly created bitcoins (currently 25 BTC) and all the transaction fees of all the transactions that are included in the block.
• It is "used" to compute two rounds of SHA256 hashing of the block header.  Each miner repeatedly calculates two rounds of SHA256 hashing on the header of the block they are working while incrementing a nonce in the header after each attempt.  The first miner to find a resulting hash that is lower than the current network difficulty can broadcast that block to all nodes they are connected to where it will then be relayed throughout the bitcoin network and added to the blockchain.
• It is "used" to provide a proof-of-work such that anyone that might want to try to modify the historical record of transactions would need to provide more work of an identical kind than the entire network of bitcoin miners have provided since the transaction was confirmed.  This creates a financial burden on the attacker that makes it undesirable to even try.

No, it couldn't.

We know this because it is open source.  Any programmer can read the programming and see exactly what it does.  They can see that it just calculates a SHA256 hash, and doesn't attempt to "crack some encryption".

it's provably wasted on nothing except for making a proof of time and energy and money are wasted, so that the waster can be 'compensated' for his lost energy and time.
The way it's wasted is by computing sha256 hashes until it's numerical value is less then a certain target number. Its like taking about 23 6-sided dices, and rolling them all until they is all 6's at the same time(except that you can proof to the world that you did get them all 6's and did not cheat in the process).

The point of all that hashing is NOT to generate random coins for the miners. It's too secure and validate transactions. That miners are rewarded is a by product of needing a means to get coins into circulation and to provide an incentive for them to actually do that work, at least until such time as the transaction fees in a block are high enough to provide them with incentive all on their own.

I think a lot of people seem to omit that part, or reverse it in their minds. Especially people who say that they route to riches is in owning bitcoins for their appeciation potential because buying mining hardware is a money losing proposition; if that is (or, more, if it remains) the case, buying BTC will be just as poor as an investment, because if miners pull the plug due to costs being more than revenues, it'll be impossible to transact in bitcoins, if even it cash them out in irder to enjoy that appreciation.

But yeah. Without mining, bitcoin is dead in the water. And it exists for a far more important purpose than to give coins away to random miners :)

The computing power is used to secure the blockchain. The more computing power, the more secure the blockchain becomes.

No this is not correct. Mining is a money loosing proposition nowadays. But that doesn't mean that bitcoin is going to sink. It just means the people will try harder to make better mining equipment or they will give up like you say and make room for other people. Also difficulty can go down as well as up. If enough people give up mining difficulty will go down and people will again have an incentive to mine. It's a free market basically.

This is what my friend is gonna get in his face :D
Thank you very much for explaining this clearly to me. This is much appreciated and it will definitely help my speach when I talk about BTC.
Now i just have to go help BTC take over the world.
Many thanks.

Simple answer: the hashpower is used to audit the transactions.

This is the kind of thing I say to normal people:

'I am a bitcoin miner, one of thousands of independent auditors that all work together to ensure all payments are correct. As a reward for this work we are paid a tiny amount of BTC every so often'.

The problem with that simplification, beyond it being pedantically wrong, is that it results in incorrect understandings about what malicious miners could do and what purpose the other nodes on the network serve.

All Bitcoin nodes audit all transactions. Bitcoin is predominantly zero trust... everyone checks everything, and this is important to creating the economic incentives that keep miners honest.

Mining exists to make transactions irreversible through people expending energy "cementing" the transaction history they believe to be the official history, and in doing so producing a consensus which can be cheaply validated by anyone.

It is used to secure the Bitcoin blockchain from an outside attack.


If he wishes to manipulate the blockchain all he simply has to do is expend more energy than what is currently being used to secure it.

NO

NO


The computing power is used to ensure the security of the bitcoin network. And security is never cheap, never.

This convinced me so much i didn't read further...
The last sentence was usefull tho. But the first two were absolutely a waste of time. Give me more than these "NO" man. Tho i got enough from other comments, I'm sure you can develop more than just "NO". And don't shout at me. It doesn't help me understand better. When explaining you have to lower yourself to the level of your dumbest listener. otherwise you're wasting your time. (Yeah i know i'm gready, give a no and i'm asking for more, give me a second one and i'm asking for a full blast explanation)

Security comes at a cost and we all sharing this cost. For once, mankind is pretty generous. Seems almost too good to be true :D

It's purely wasted. it doesn't even waste it on trying to find prime numbers which at least has some scientific value.

The power isn't wasted on securing the network either, the reward is doing that. The reward is the incentive for people to waste power to mine, and it prevents the 50% attack which would kill bitcoin. The thing is as difficulty to mine rises, the mining is becoming more and more centralized, which will cause a more and more likely event of 50% attacks. Bitcoin supporters defend this by saying that that centralized power will have no interest in doing 50% attacks because it would destroy his money infrastructure (that would be bitcoin). Ironically, the Federal Reserve has no interest in destroying their dollar either, it's their money infrastructure and their power on the line.

What is waste is subjective. Security is not waste imho

I don't think you even know how the 'security' truly works. It's pretty simple: there is no security, atleast not on the peer-to-peer level which is the foundation of bitcoin. See my extended post above

then why do you think we expend a lot of energy and fuel to dig gold out of the ground? is it necessary?

you can see mining like finding serial numbers for Bitcoins (although that is technically not entirely accurate, but may be a good short comparison or explanation for newcomers) in order to limit the money supply in order to make bitcoins valuable.

Primecoin is a nice experiment, but it's yet unproven if those chains of prime numbers provide any additional value.

I agree energy expenditure required by proof-of-work is not the nicest thing about Bitcoin, but the only alternatives known so far to reach consensus in a decentralized system are proof-of-stake and a web of trust. Both have other problems.

In theory, a centralized digital currency and transaction system would require only a database and could be much more energy efficient, but I'm not so sure in practice when I look at the big banks and all their COBOL crap they're still running on inefficient, legacy mainframes in giant data centers.

If you kill trees and print up fancy toilet paper with heads of dead presidents then it's not "going up in smoke" but God forbid you let your Bitcoin miner run, the environment yo!

Those prime numbers primecoin is searching for have absolutely no scientific value. The problem is you need a very specific "cryptographic puzzle" to do what the bitcoin puzzle does, one that's difficult to solve but very easy to verify. Protein folding and such "useful" problems are almost never of such type.

Trees?

I didn't think any currency was printed on paper made from trees.

I'm pretty sure that U.S. currency is 75% cotton and 25% linen

I'm pretty sure there hasn't been currency made from wood pulp paper in any country since at least the 19th century. Even wartime emergency money (Notgeld) wasn't printed on wood pulp paper.

I think this is the best answer you can give him.

Ok then

1)Computing power is NOT used to create bitcoins. You can create all the coins even with a single Pentium 1

2)The algorithm is open source and known, it is just sha256 hashing  :D

If you don't mind, could you explain what you mean by this?  I'm not sure that you and I are representing the same concept when using the words "create all the coins".

The computing power is used to increase the amount of work an attacker would need to expend in order to disrupt the network.

"Useless" computations are better for this, because it means any computations an attacker performs which are not sufficient to achieve the effect they want truly are wasted, making failed attacks very expensive.

It is used to heat up cold homes. :)

Love it - nicely put.

Good suggestion, especially now that winter is coming  :)

Nice answer, gave a lot more intel than the previous one. Cheers mate :-)

I think there probably are practical problems besides just finding prime numbers that could be solved for the purpose of Bitcoin. There's no reason not to switch to that. It's probably just not a priority right now.

Do you have any examples, or are you just making stuff up because you like the way it sounds?

Use this metaphor:

Every computer participating in mining is a type of digital accountant. Every accountant is competing for the privilege of writing a page in a universal ledger everyone can read and check for errors. If an account guesses a correct number and records a page in the ledger they are awarded a sum of bitcoin.

This has been the best way of explaining mining to folks that I have encountered.

The guessing game being played is the correct header for the next block, I believe, but someone could probably correct that for me.

How much have you thought about it because it not a trivial problem.

A proof of work must have the following characteristics:
a) have an adjustable "difficulty" which works under a very large range (bitcoin difficulty is ~150,000,000x higher today than at genesis and likely will go another 10x to 100x over next year).

b) be very fast to verify (<100ms).   Bitcoin has 52K blocks per year so someon bootstrapping 10 years after genesis woould need to validate 520K blocks in a timely manner.

c) the input of the proof must be linked to a prior proof to prevent precomputation (Bitcoin uses the prior block hash as input for current block hash to prevent solving "future" blocks).

d) the proof should be relatively compact (Bitcoin uses a 32 byte hash)

e) the solution should be probabilistic.  This means that given two competitors and one has 10x the computing power the smaller competitor should find ~9% of the solutions.  Many problems are not probablistic such that the faster competitor will always arrive at a solution first.  That would be bad from a security standpoint.

f) require no outside "trusted" source or central authority for issuing or assigning work.

h) have a mechanism to prevent  duplicated work across the network without any communication to a peer or outside data source.

Most simplistic "answers" fail this test.   For example using folding@home would work as a proof of work as long as you are willing to have the administrators of folding@home be the central bank with complete control and authority over the currency.

That is a good simplification.  I would change "correct" to "good enough" as correct implies there is only one possible solution.  For any given block there is a nearly infinite possible solutions.  Miners are collectively just looking for the first one which is "good enough".   We measure good enough by the target, which is a 256 bit number directly proportional to difficulty.  The miner constructs a valid block, hashes it and checks to see if it is "good enough" that is the resulting hash is smaller than the target.

Right down the target is: 000000000000001CDC2000000000000000000000000000000000000000000000.  There are ~2x10^60 hashes smaller than this value and any will meet the block difficulty requirements.

Thanks D&T

I understood the good enough concept but I never worked it in to the metaphor. I think that's a good way of explaining difficult and scale w/r/t new people competing to make the guess.

Even if other things can't be done, just finding prime numbers isn't exactly useless. Maybe there are similar things that can be found. Bitcoin can be altered by consensus--a necessary survival feature--so it's not as though this fact is really a knock against the continued use of Bitcoin. When you need to adjust the difficulty, just give multiple problems. Primecoin manages, but primecoin is silly because Bitcoin could obsolete it easily if it chose. We could even choose which kind of problem we want to solve (if the network scales difficulty to be the same) when we mine, if other alternatives exist.

I think people are overrreacting to the OP as a knee-jerk reaction to defend Bitcoin, when really that's not necessary. Bitcoin is the best option for a money system, but it's not perfect and can always improve.

In my opinion, if you can secure Bitcoin, and do something useful, like finding prime numbers, but maybe more useful :D Perhaps a proof of work system could be established in a future coin, based off of protein folding.